What is a rabbi trust? The term was coined when the Internal Revenue Service (IRS) ruled on the use of a trust by a temple's congregation to provide and protect nonqualified deferred compensation (NQDC) plan assets for its rabbi. Given that NQDCs are based on a promise - typically in the form of a legal agreement - of future payment, a rabbi trust is a way to help assure the employee that the benefits will be paid when promised. Using a third party, such as an independent bank or trust company, a trustee demonstrates to the employee that assets are protected in the event of a business downturn or management change. The trustee, however, is first obligated to pay any creditors in the event of insolvency or bankruptcy.

CRN200802-2013734